If this has grabbed your attention you may be surprised to learn that many people will exclusively rely upon the State Pension to fund their lifestyle in retirement and £155.65 per week (£8,093.80 per annum) is the maximum, assuming you are entitled to it. From April 2017, it’s set to rise to £159.55 per week (£8,296.60 per annum).
Pensions may be a boring subject for many folk, but the more you save the more you can look forward to in retirement and since we are generally living longer, it makes sense to make some form of provision while you are still working.
Previous generations may have lived into their 70’s and some into their 80’s, but statistics continue to point towards the fact that survival into our 90’s and beyond is becoming increasingly commonplace, so those reliant on the State Pension alone may need to think carefully about their lifestyle in retirement, which could be 30 years or more after it first becomes payable.
Once you stop working, your outgoings may reduce - you’ll no longer be travelling to work, the kids may have flown the nest and many will have paid off their debts and mortgages - but it’s worth having a figure in mind that you think you’ll be able to live off when you decide to stop working. If it’s half of your current salary then you need to think about how much you’ll need to save now and over the coming years to pay yourself that amount for say, 20 or 30 years.
Make sure you obtain a State Pension forecast, so you’ll have an idea as to how much the state will provide you, so you’ll know how much you will need to fill the gap.
Those employed and aged between 16 and 74 may be able to be opted into a workplace pension through automatic enrolment legislation and if you are enrolled your employer will pay in too.
The minimum contribution is based on something called qualifying earnings, which is a band of earnings between £5,824 and £43,000 for the current tax year. Qualifying earnings include basic pay, bonuses, overtime, commissions and certain statutory benefits, such as sick pay. For 2017/18 tax year these figures rise to £5,876 and £45,000 respectively.
Up until 5 April 2018 the minimum payments are just 1% from the employer and 1% from the employee, but this is set to rise to 3% from the employer and 5% from the employee by 6 April 2019, but will this be sufficient to fill the gap and meet what you need? For most people it won’t, so it’s wise to seek advice on the best way forward.
To review your retirement plans and provisions, contact our Financial Planning Team on 0808 144 5575, or visit an adviser at any of our office locations.
If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletterSubscribe